Transcript Slide 1

The Role of OPEC
in Oil Market Stability
presented by
Mohammad Alipour-Jeddi
Head, Petroleum Market Analysis Department
Organization of Petroleum Exporting Countries
Vienna Economic Forum
5th November 2007
Vienna
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Outline
• Understanding OPEC
• Review of the oil market
– Historical developments
– Recent developments
• Prospects
– OPEC capacity expansion
• Concluding Remarks
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• Understanding OPEC
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© 2006, Organization of the Petroleum Exporting Countries
OPEC profile

Average GDP per capita: $2,200

But there is a very wide range ($550-$45,960)

95% of the 533 million people in OPEC live in a country where
GDP per capita is no higher than $5,000

This compares with OECD average GDP per capita of over
$28,000

Average life expectancy: 61 years

Oil Dependency of OPEC MCs
Share of oil exports in total exports 68% (15%-95%)
Share of oil exports in GDP
27% (5%-59%)
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OPEC objectives
OPEC Statute (Article 2)
“The
principal aim of the Organization shall be the
coordination and unification of the petroleum policies of
Member Countries and the determination of the best means
for safeguarding their interests, individually and collectively”
“The Organization shall devise ways and means of ensuring
the stabilisation of prices in international oil markets, with a
view to eliminating harmful and unnecessary fluctuations”
“Due regard shall be given at all times to the interests of the
producing nations and to the necessity of securing: a steady
income to the producing countries; an efficient, economic
and regular supply of petroleum to consuming nations;
and a fair return on their capital to those investing in the
petroleum industry”
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OPEC’s role in a globalised and interconnected world
 Engagement in dialogue with producers &
consumers The Conference

OPEC – EU

OPEC – IEA

OPEC – China
 Active role & participation in international forums

IMF, World Bank, IRU,…
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• Review of the oil market
– Historical developments
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Continued increase in world oil demand, but
structural shift in oil demand growth
O il D e m a n d (m b /d )
90
OECD
80
70
1960
2006
1 6 .7
4 9 .2
N o n -O E C D
3 .8
2 8 .1
C h in a
0 .1
7 .1
2 0 .7
8 4 .4
T o ta l
mb/d
60
50
40
30
20
10
2005
2002
1999
1996
1993
Non-OECD (excl. China)
1990
1987
1984
1981
1978
1975
1972
1969
1966
1963
1960
Total OECD
China
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OPEC production: Maintaining market balance
(mb/d)
55
55
OPEC’s response to
global demand drop (OECD),
rise of non-OPEC
50
45
50
45
40
40
35
35
30
30
25
25
OPEC’s response
to long term rise
in demand
20
15
OPEC’s response to
rising demand
10
20
15
10
5
5
0
0
2006
2003
1999
1996
1993
1990
OPEC NGL
1987
1984
1981
1978
1975
1972
1969
1966
1963
1960
OPEC Crude
Non-OPEC supply
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Supply security: Supply exceeding demand
mb/d
3.50
2.50
1.50
0.50
-0.50
-1.50
Sharp decline in demand
due to Asia crisis
OPEC Spare capacity
reached 45%
-2.50
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
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• Review of the oil market
– Recent developments
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Recent developments in crude oil prices
($US/b)
52
46
40
34
28
22
16
10
4
Price Band
Unstable low prices
following Asian crisis
Basket
6 Month Moving Average
Volatile
period
Relative stability
Upward
shift in price
Mar 97
Aug 97
Jan 98
Jun 98
Nov 98
Apr 99
Sep 99
Feb 00
Jul 00
Dec 00
May 01
Oct 01
Mar 02
Aug 02
Jan 03
Jun 03
Nov 03
Apr 04
Sep 04
Feb 05
Jul 05
Dec 05
May 06
Oct 06
Mar 07
Aug 07
82
76
70
64
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OPEC Reference Basket value considerably lower in
euros than in US dollars
80
70
US dollar
60
Euro
50
40
30
Oil Price rise Jan 03 - Sep 07:
20
US$:145% , €: 88%
10
0
Jul-07
Apr-07
Jan-07
Oct-06
Jul-06
Apr-06
Jan-06
Oct-05
Jul-05
Apr-05
Jan-05
Oct-04
Jul-04
Apr-04
Jan-04
Oct-03
Jul-03
Apr-03
Jan-03
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Factors behind upward shift in prices
since 2004
• Surge in demand due to strong world GDP
growth at 30-year high
• Weak non-OPEC supply
• Increasing OPEC production
• Downstream bottlenecks
• Geopolitical tensions and increased activity in
futures markets magnifying price volatility
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• Prospects
– OPEC capacity expansion
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OPEC/non-OPEC share in oil reserves and
production (%)
Reserves
90
Production
80
70
60
In 2006 OPEC
accounted for 77.2%
of global oil reserves…
50
40
…but only 44.5% of
crude oil production
30
20
10
0
OPEC
non-OPEC
OPEC
non-OPEC
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OPEC production capacity plans by country
mb/d
14
12
10
8
6
4
2
0
2006
2012
Iraq
Venezuela
UAE
Saudi Arabia
Qatar
Nigeria
Libya, S.P.A.J.
Kuwait
Iran, I.R.
Indonesia
Angola
Algeria
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OPEC production capacity plans
50
50
45
45
40
40
35
35
30
30
25
25
20
20
2012
2011
2010
NGL+Other Liquids
2009
2008
2007
2006
Iraq
2005
2004
2003
2002
2001
OPEC (excl. Iraq)
mb/d
mb/d
including NGLs
Demand for OPEC Crude
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OPEC refining expansion plans
tb/d
OPEC distillation capacity increment around 3.6 mb/d
2008-2012
Algeria
Angola
300
100
300
Indonesia
200549
900
Iran
Iraq
Kuwait
280
346
615
Qatar
Saudi Arabia
UAE
Venezuela
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Concluding remarks
 OPEC reserve base is sufficient to meet projected world oil
demand (oil: 77%, natural gas: 49% of total world reserves)
 OPEC Members are undertaking investments to expand
supply capacity (more than 5 mb/d by 2012) to meet the
expected increase in world oil demand and provide an
adequate cushion of supply
 Additional efforts are also being made to address tightness in
downstream
 Recent Ministerial decision to increase OPEC production by
0.5 mb/d is a clear demonstration of the Organization’s
concern about the continued health of the world economy as
well as its ongoing commitment to ensure adequate supplies,
especially ahead of the high-demand winter season
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Concluding remarks
 Security of demand is vital to ensuring that the appropriate level of
investments are made in OPEC Member Countries to minimise the
risks associated with under- and over-investment
 Consumers governments should consider minimising policyinduced uncertainties on oil demand
 OPEC attaches great importance to the need for deepening and
widening the dialogue between producers and consumers for the
benefit of both
 The Third Summit of Heads of State and Government of OPEC
Member Countries, to be held in Saudi Arabia in November 15-16,
will provide long-term guidance to enhance OPEC’s stabilising role
in the market and ensure adequate supplies to meet energy needs
for sustainable development
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www.opec.org
Thank you
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© 2006, Organization of the Petroleum Exporting Countries